5/11/20: BRIC: Services PMIs October

In the earlier post, I covered BRIC economies manufacturing PMIs for October: https://trueeconomics.blogspot.com/2020/11/31120-bric-manufacturing-pmis-october.html. Now, leet's take a look at Services PMI.

As the chart above illustrates:

• Brazil Services PMI rose from 47.5 in 3Q 2020 to 52.3 in October. Prior to October, Brazil's services sector was in a contractionary territory for three consecutive quarters. October marks the second month of above 50.0 readings, although statistically-speaking, September reading was indistinguishable from 50.0 stagnation / zero growth level.
• Russian Services PMI posted a sharp contraction, falling from 56.8 in 3Q 2020 to 46.9 in October. Russia enjoyed just three months of > 50.0 readings in July-September 2020, implying that the economy is nowhere near a V-shaped recovery from the pandemic and that things are getting worse, not better in the services sectors. Even worse dynamics apply to Manufacturing where Russia has not seen sustained > 50 readings since March 2019.
• India Services PMI rose to 54.1 in October, marking the first month of above 50.0 readings since February 2020. Given cumulative nature of the PMIs, October rebound is nowhere near being sizeable enough to start closing the pandemic-induced drop-off in economic activity. India's services have now posted seven months of contraction in 2020, compared to four months for Manufacturing. October marks the first month since February with both indices above 50.0.
• Chinese Services PMI rose to 56.8 in October, compared to 54.8 in September, marking 6th consecutive month of both Manufacturing and Services PMIs above 50.0 line. 

Overall, BRIC Services Activity Index (a measure of Services sectors activity calculated by me based on monthly Markit PMI data and country-specific share of the world GDP, PPP-adjusted) rose to 54.9 in October compared to 51.0 in 3Q 2020, marking a second month of > 50.0 readings and accelerating growth momentum. October BRIC reading is in excess of the Global Services PMI reading of 52.9, implying that as a group, BRIC economies are contributing positively to global economic growth momentum, although both Brazil and Russia are pushing BRIC reading down, compared to Global Services PMI.

3/11/20: Ireland PMIs and Economic Activity Dynamics for October

October PMI data for Ireland is showing serious strains from the pandemic and wave 2 on the economic activity: 

• Manufacturing PMI for October came at a recessionary 48.3, marking a moderation on rapid contraction in the sector activity in September (45.8). This marks the second consecutive month of the Manufacturing PMI reading sub-50, and follows two months of partial (at best) recovery in July and August.
• Services sector PMI for October was at 50.3 - a statistically indifferent reading from zero growth 50.0 recorded in September.
• Official Composite PMI was at 49.0 in October, up on 46.9 in September, but still marking a decline in economic activity for the second month in a row. 
• Since Construction sector PMI is not published until mid-month, we only have September reading for the sector. Based on this, my three-sectors activity indicator that weighs all three sectors based on their contribution to the gross value added has rise to 49.05 from 47.48 in September:

Overall, all PMIs point to a significant weakness in the economy in September continuing into October. Keep in mind that PMIs are effectively cumulative: sub-50 reading in September implies a decline in economic activity relative to August. If this is followed by a sub-50 reading in October, the new decline is being signalled is on already diminished September activity.

3/11/20: COVID19 Update: Nordics

Things are getting more complicated in the Nordics in the wake of the unfolding second wave of the pandemic:

The second wave of the pandemic has started first in the Nordics excluding Sweden, but the same wave is now also beginning to manifest itself in Sweden. Adding to the complexity of analysis, Swedish data is now being reported with significant volatility (multiple consecutive '0' observations per week), making higher frequency comparatives basically impossible.

Nonetheless, Sweden is now catching up, once again, with the rest of the Nordics in terms of new cases.  In the last 7 days, Sweden averaged 1,204 cases per day (up on 627 average daily rate of new cases in the two weeks prior). Nordics ex-Sweden averaged (adjusting to Swedish population) 3,228 daily new cases over thee last 7 days, with prior 14 days average of 2,775.

In terms of daily deaths, Sweden currently performs significantly better than the rest of the Nordics. Sweden's average daily deaths run at 0 over the last 7 days and 0.43 deaths per day average over the prior 14 days period. Nordics ex-Sweden (again adjusting to Swedish population) averaged 17 deaths per day in the last 7 days, and 10.6 deaths in thee prior two weeks period. However, this better performance by Sweden is at least in part due to the later start of the second wave of the pandemic in thee country compared to other Nordics.

Overall, for now, excess deaths count in Sweden compared to other Nordics is shrinking, currently at 2,580.

Only time will tell whether thee current second wave dynamics are going to push Sweden once again into the position of being worse-hit by the pandemic than its Nordic counterparts. 

3/11/20: BRIC: Manufacturing PMIs October

 BRIC's manufacturing PMIs are out for October, marking the start of Q4 2020. Overall, the results reinforce Q3 2020 trends highlighted here: https://trueeconomics.blogspot.com/2020/10/141020-bric-manufacturing-pmis-q3.html. 

• Brazil posted further acceleration in the recovery momentum with Manufacturing PMI rising to 66.7 from 3Q 2020 62.6. 3Q 2020 was the historical record quarter for Brazil's Manufacturing PMI readings. Brazil's Manufacturing PMIs have now strengthened every month since May 2020, the last month of sub-50 readings.
• In contrast to Brazil, Russia Manufacturing PMI slipped again in October, hitting a 5-months low at 46.9, down from 48.9 in September and well below already poor 49.5 reading for 3Q 2020. Prior to 4Q 2020, Russia clocked five consecutive quarters of Manufacturing PMIs below 50.0 mark.
• China Manufacturing PMI rose from 53.0 in 3Q 2020 to 53.6 in October. China's latest reading is on-trend, with rising PMIs for the third quarter in a row. 
• India Manufacturing PMI stood at 51.6 in 3Q 2020 and this improved to 58.9 in October, marking a major acceleration in growth conditions. 
• Three of the BRIC economies have posted October Manufacturing PMI readings more robust than Global PMI reading of 53.0. Thus, overall BRIC Manufacturing activity index stood at 55.2 in October, well ahead of 53.0 reading for 3Q 2020. The last time BRIC Manufacturing activity index was below that of the Global Manufacturing PMI was 4Q 2018.
• Russia was the only BRIC economy to continue posting recessionary PMI reading in its manufacturing sector. 

3/11/20: COVID19 Update: Russia

Russia is experiencing a second wave of the pandemic that started around September 10-12 is still gaining speed in terms of new cases and deaths counts:

This wave is both deadlier and more severe in terms of new cases than the previous one, although there appears to be less pressure on the public health system so far. Nonetheless, November data to-date shows much higher daily average new infections (subject, partially, to higher rates of testing), and higher daily deaths counts (clearly not accounted for by higher testing):

Comparatively, Russia is performing relatively ok, when set against other BRIICS and the U.S. and the EU27 experiences: 

3/11/20: COVID19 Update: U.S. vs EU27

EU27 vs U.S. comparatives for data through November 3:

• The U.S. has a vastly higher death rate per 1 million population than the EU27 rate: 
• Current death rate per 1 million of population in the U.S. is 707.7
• Current death rate per 1 million of population in the EU27 is 396.8
• Put differently, current U.S. death rate per capita is 78 percent above that for the EU27, though this gap is now closing (it was 86% a week ago).
• Overall counts of deaths in the U.S. are now above the EU27, since July 12
• Current excess gap is at +65,585. 
• Adjusted for population and pandemic timing differences, the gap is 123,449. 
• The U.S. & the EU27 are in 2nd waves of infections. October 1st to-date, EU27 daily cases have surpassed the U.S. on all but 2 days & deaths on 18 occasions

Across the board:

• EU27 second wave is savage in terms of new cases counts (more than four times the rate of the peak wave 1) and deaths counts are climbing up at a fast pace. On the current trajectory (note: this is not a formal forecast, but a point of warning), the EU27 deaths will be testing 3,000 per day counts mark within this month. 
• U.S. is in a third or a second wave of the pandemic - depending on how one counts the 'waves' - in terms of new cases, but is yet to post consistent uptick in deaths. Nonetheless, in the last 10 days, deaths counts have also ticked up. Given that new cases in the U.S. are currently running at above thee last wave peak levels, we can expect continued increases in daily deaths counts too, albeit with longer lag on account of earlier detections and younger demographics of new cases. 

Here are some really shameful stats, positioning EU27 and U.S. performance in the context of all countries with > 100,000 cases:

Out of 51 countries with >100,000 cases + EU27, 

• The U.S. is ranked 6th worst in terms of cases per capita, 10th worst in terms of deaths per capita, and 24th worst in terms of deaths per 1,000 confirmed infections. Across all key metrics of the pandemic, the U.S. ranks 8th worst in the world.
• The EU27 is ranked 20h worst in terms of cases per capita, 19th worst in terms of deaths per capita, and 20th worst in terms of deaths per 1,000 confirmed infections. Across all key metrics of the pandemic, the U.S. ranks 20th worst in the world.

Peer-comparatives:

3/11/20: COVID19 Update: Countries with > 100,000 cases

 Updating tables for countries with > 100,000 cases, data through November 3 ECDC reporting:

Both, the U.S. and the EU27 are currently in the new wave of the pandemic (more on this later). That said, across three key metrics: new cases per capita, deaths per capita and deaths per case:

• The EU27 would have ranked 17th worst case in the total group of 51 countries + EU27; the U.S. ranks 8th worst.
• The UK ranks 7th worst.
• Sweden, the 'herd immunity' darling ranks 15th worst across the board, 7th worst in deaths per 1,000 cases, and 16th worst in deaths per 1 million of population. For comparison, the Netherlands ranks 20th worst - the only other Nordic country to make it into the table of countries with > 100,000 cases. 
• Peru, followed by Belgium and Spain are the worst three countries across all metrics (combined).

3/11/20: COVID19 Update: Worldwide Cases and Deaths

 The pandemic is once again re-accelerating worldwide: 

Increasing death counts above the relatively stable trend/average of the prior three months is worrying. Growth rates in new infections and new deaths in October and in the first three days of November are also out of line with past months' experience:

Summary tables:

Despite relative easing of public anxiety over the public health risks, COVID19 pandemic remains on a full-blown expansionary path and the recent dramatic - exponential - rise in new cases, whilst in part driven by improved testing, is now showing signs of lifting up daily deaths counts, with new deaths coming in at above March-September averages in October and in the first days of November.

3/11/20: Monte dei Paschi is Eying Another Capital Raise?

Remember them? 

One of Europe's largest banks? Check. The oldest bank in the world with continued trading since 1472? Check. The first bank in history to require a sovereign rescue? Check. In 1624, the Medici Grand Duke of Tuscany rushed to guarantee the deposits of a bank at a time of economic crisis. The only bank in known history that has been bailed out at least five times and nationalised at least twice? Check.

Yep, right, we have the new old news from Italy's Banca Monte dei Paschi di Sienna. Just two and a half years after the last Government rescue in 2017 MPS is now rumoured to need another capital injection: https://www.reuters.com/article/italy-banks-monte-dei-paschi/rpt-update-1-monte-dei-paschi-ceo-tells-board-bank-faces-2-bln-euro-capital-gap-source-idUSL1N2HP0EV. 

The latest capital call is a mixture of the residual problems from the, yes, now more than a decade-old (hew, what's decades for MPS, right?) financial crisis and the fresh blows to thee Italian (and European) banks from the pandemic. 

Overall, major European banks have been increasing their capital cushions in thee early stages of the pandemic (https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/europe-s-top-banks-bulk-up-capital-cushions-but-market-wary-as-virus-resurges-60666650). And, so far, losses in most banks have been either mild or inexistent, and most certainly well below the original (1Q 2020) expectations (https://www.ft.com/content/4d9ee2a0-8e44-4091-b6b7-ca9302f0f314). But banks are losing capital in bucketloads (https://o.canada.com/financial-times/global-banks-lost-nearly-us1-trillion-in-market-value-in-the-pandemics-first-wave-and-theres-another-one-coming/wcm/fe7ab3c9-3681-4703-9833-91a9baf71796) and losses recognitions cannot be delayed for too long (https://www.euromoney.com/article/27ohbp85c1ossyw7im1og/capital-markets/the-road-ahead-europes-banks-face-limited-options-as-they-cope-with-covids-aftermath). 

All in, with the second wave of the pandemic raging across the EU, MPS's latest problems are probably just an early warning signal for the rest of the Eeuropean banking sector. 

2/11/20: U.S. Public Health Systems Are Going to Continue Failing After the COVID19

Pre-conditions: amidst ageing population and declining life expectancy, both political parties' platforms effectively represent extension of the status quo model of healthcare provision.

Question: can the U.S. actually sustain any semblance of or pretence at having a functioning healthcare system, given the expected trajectory of demand for healthcare services?

Answer: not a chance:

Source of the chart: McKinsey (not Communists who support nationalised health).

2/11/2020: Technological Deepening and De-globalization post-COVID

Interesting insights from McKinsey on changes in technology adoption in response to COVID19 pandemic:

In the ed, I marked two types of technological frontier shifts: the ones relating to displacement of status quo-ante in supply chains - re-orientation from China; and the ones relating to technological deepening. Both are the legacy of the U.S. political and economic shift toward de-globalization. 

31/10/20: Gold Coins Market is Still Hedging Residual Covid Risk

Sales of the U.S. Mint gold coins have moderated off their pandemic highs, but remain elevated by historical standards, especially controlling for higher gold prices:

Since hitting a pandemic-period high of 216,500 oz in March 2020 (the highest sales volume since April 2013), the demand has moderated through June, topped 145,000 in July and 149,000 oz in August, and has been around 91,500 through the four weeks of October. This puts October sales above the last three years' average.

Average gold weight per coin sold remains relatively elevated and is co-trending with price per oz, most likely indicating lasting FOMO effect (herding by investors). The correlation is weaker than during prior episodes of major crises and recessions, suggesting that the pandemic-period demand is probably less influenced by the herding effects than in prior crises.

Annualized data through October also confirms precautionary, but not 'flight to safety' type of demand:

As the pandemic re-accelerates, it will be interesting to see how seasonality (uplift in end-of-year sales) plays out against the pandemic-related hedging positioning of investors.